was error in the conclusions of the Supreme Court of the State, and its judgments are affirmed." 73 § 400. Argument for permitting disproportionate rates. So far as there is as yet actual law upon this problem of the revision of particular rates, the outcome still hangs in the balance where it is not unlikely it will long remain. It must be conceded that at first sight the weight of authority would seem to be against one who is claiming that the particular rates in a schedule should not be unreasonably disproportionate. But upon examination this weight of authority will be found only for a limited proposition. It is true that by what is still the weight of authority the imposition of a rate by legislation, which fixes so disproportionately low a rate for a particular service as to make that service admittedly unprofitable will nevertheless not be held to be unconstitutional, if from its total receipts the company in question will get a fair return on its proper capital above operating expenses and reasonable charges. The Supreme Court of the United States still holds to the doctrine first clearly announced in Minneapolis & St. Louis Railroad Company v. Minnesota 74 where Mr. Justice Brown in justifying an order of the State commission so reducing the rate on coal that its 73 See also Missouri Pacific Ry. v. Tucker, 230 U. S. 340, 57 L. ed. 1507, 33 Sup. Ct. 985, holding that a railroad can insist upon having a fair return for services rendered, and that to compel it to serve for rates which are unremunerative is virtually confiscation. 74 186 U. S. 257, 46 L. ed. 1151, 22 Sup. Ct. 901. The court had already committed itself to this doctrine in St. Louis & S. F. R.. R. Co. v. Gill, 156 U. S. 649, 39 L. ed. 567, 15 Sup. Ct. 484; see further to the same effect: Interstate Consolidated St. Ry. Co. v. Massachu setts, 207 U. S. 79, 52 L. ed. 111, 28 Sup. Ct. 26; Willcox v. Consolidated Gas Co., 212 U. S. 19, 53 L. ed. 382, 29 Sup. Ct. 192; Southern R. R. Co. v. McNeill, 155 Fed. 756; Central of Ga. Ry. Co. v. McLendon, 157 Fed. 974; In re Arkansas R. R. Rates, 168 Fed. 720. But see Lake Shore & M. S. Ry. Co. v. Smith, 173 U. S. 684, 43 L. ed. 858, 19 Sup. Ct. 565. See also Southern Ry. Co. v. Atlanta Stove Works, 128 Ga. 207, 57 S. E. 429; State ex rel. v. Northern Pacific Ry. Co. (N. D.), 120 N. W. 869, 25 L. R. A. (N. S.) 1001. transportation would be at a loss said: "Notwithstanding the evidence of the defendant that if the rates upon all merchandise were fixed at the amount imposed by the commission upon coal in carload lots, the road would not pay its operating expenses, it may well be that the existing rates upon other merchandise, which are not disturbed by the commission, may be sufficient to earn a large profit to the company, though it may earn little or nothing upon coal in carload lots." 75 § 401. Authorities opposed to disproportion. It should be noted, however, that there has been vigorous protest of late years against this proposition, even as it has been limited. In this connection the recent case of the Pennsylvania Railroad Company v. Philadelphia County 76 deserves full consideration as the latest expression of the modern tendency to look into the different departments of the business in their relation to one another. In that case there was a bill in equity to restrain the enforcement of the Pennsylvania statute imposing a two-cent passenger rate. It was urged in defense of the legislation that, although it might leave no profit to the railroad in question upon its passenger traffic, the gross receipts of that railroad would, notwithstanding this, be sufficient to pay a fair profit 75 Note also the language of the Commission in at least these two cases: It is a well-established and generally recognized rule that if additional business can be taken on at rates which will contribute little in addition to actual out-of-pocket expense, the carrier will be advantaged to that extent and all its patrons will be benefited to the extent to which such traffic contributed to the net revenue. Boileau v. P. & L. E. R. R. Co., 24 I. C. C. 129. A violation of section 3 cannot be predicated upon a difference in rates upon its whole capital. But on non-competing articles, unless the rate on the favored article is so low as to be unremunerative and fail to carry its share of the burden of producing revenue. Bartlesville Salvage Co. v. M., K. & T. Ry. Co., 25 I. C. C. 672. 76 220 Pa. St. 100, 68 Atl. 676, 15 L. R. A. (N. S.) 108. See further to the same effect: Gulf, C. & S. F. R. R. Co. v. Railroad Commission (Tex.), 116 S. W. 795; Coal & Coke Ry. Co. v. Conley, 82 W. Va. 129, 67 S. E. 613. the Pennsylvania Supreme Court held the legislation unconstitutional upon this showing, Chief Justice Mitchell saying: "True business principles require that the passenger and freight traffic not only may, but should be separately considered. The intelligent business of the world is done in that way. Every merchant and manufacturer examines and ascertains the unprofitable branches of his business with a view to reducing or cutting them off entirely, and there is no reason why a railroad or other corporation should not be permitted to do the same thing as long as its substantial corporate duties under its franchise are performed. While the public has certain rights which in the case of conflict must prevail, yet it must not be forgotten that even so-called public service corporations are private property organized and conducted for private corporate profit. And unless necessary for the fulfillment of their corporate duties they should not be required to do any part of their business in an unbusinesslike way with a resulting loss. If part is unprofitable it is neither good business nor justice to make it more so because the loss can be offset by the profit on the rest. To concede that principle would, as the court below indicated, permit the legislature to compel the carriage of passengers practically for nothing though the inexorable result would be that freight must pay inequitable rates that passenger travel may be cheap." "7 Topic C. Factors Modifying Average Cost $402. Cost of service insufficient in itself. 77 To be entirely fair, the cost of service is not always the 77 Note also the following rulings of the Commission: Where proposed rates will yield less than the average cost of operation per ton per mile on all traffic, advances held to be justified. Rates on Sand to Houston, Tex., 26 I. C. C. 677. Carriers may not haul a particular class of traffic or traffic for a particular community at less than the cost of the service and In re recoup themselves from the charges decisive factor in determining a railroad rate, even if it could in all cases be fairly approximated. The ton-mile average cost in railroad transportation will always be found to be much modified by other factors in actual application.78 For, in the first place, it must always be impossible to arrive at the exact cost of a particular carriage. No goods, as a practical matter, are carried by themselves under such circumstances that an exact computation can be made of the cost of carriage. In the second place, even if such a computation were possible, it would not necessarily be fair to make a shipper pay the exact cost of carriage of each shipment.79 To do so would make the freight vary according to the circumstances of each journey; no man could know what he must pay for any particular shipment, and for similar carriages of the same article two shippers would pay very different charges. Practical convenience requires that the charge shall be uniform for a certain article carried over a certain route, although the exact cost of carriage may at one time be very much greater than at another.80 The exact cost of carriage, therefore, or such approximation to it as may be possible, can never be used as the sole factor in a particular rate. But while the cost of carriage cannot be used by itself to determine a particular rate, neither should it ever be neglected. Considered along with other factors, it must have a strong influence in raising or lowering the particular rate.81 78 Severe operating conditions caused by grades and curves are to be considered in determining the reasonableness of a rate. Consolidated Fuel Co. v. A., T. & S. F. Ry., 24 I. C. C. 213; Arlington Heights Fruit Exchange v. S. P. Co., 24 I. C. C. 671. 79 The severity of operating conditions, caused by grades and curves, considered in determining the reasonableness of a rate. See Taylor v. N. & W. Ry. Co., 25 I. C. C. 613; North Fork Cannel Coal Co. v. A. A. R. R., 25 I. C. C. 241; Multnomah Lumber & Box Co. v. S. P. Co., 25 I. C. C. 123; Union Tanning Co. v. S. Ry. Co., 25 I. C. C. 112. 80 Cost of service is but one of the elements to be considered in determining the reasonableness of a rate. Commercial Club of Superior v. G. N. Ry. Co., 24 I. C. C. 96. 81 Cost is an important element in § 403. Special conditions affecting cost. There may be special circumstances connected with a particular transaction which increase or decrease the cost of service; and the effect of such circumstances on the rate must be considered. For instance, the expense of constructing a mountain branch may be very much greater than that of building the main line; or the population served by the company may in places be so sparse as to make the cost of operation very great in proportion to the service demanded. All these circumstances may properly affect the rate charged in those portions of the territory served by the company; yet it appears unjust to place the whole burden upon such territory, thus accentuate its poverty, and place another handicap upon it in the effort to become prosperous. There are many things besides the mere mileage run which must be considered in fixing the rates. A uniform mileage rate imposed upon all railroads would be in reality unequal and unjust. As Mr. Justice Morse said in Wellman v. Chicago & Grand Trunk Railway: 82 "If no classification can be made, and the maximum rate must be fixed the same for all, then the law is admitted to operate unequally and unjustly, because some companies are to less expense than others in the same length of road by reason of the nature of the country through which they run; some have costly terminal facilities, and some have not; some owe large amounts, and some do not; and some do a large amount of business, and some do not.' 11 83 $404. Amount of service asked as a factor. As the amount of service asked at a particular time increases, the cost thereof tends in normal cases to fall be determining reasonableness of freight rates, but is not controlling. Louisville & N. C. & C. Rates, 26 I. C. C. 20. 82 83 Mich. 592, 47 N. W. 489. 83 Natural operating obstacles modify ton-mile averages. Grand Junction M. & F. Co. v. C. & M. Ry., 16 I. C. C. 452. |